The Weaver Watch Company manufactures ladies' watches that are sold through discount houses. Each watch is sold for $25; the fixed costs are $140,000 for 30,000 watches or less; variable costs are $15 per watch.
a. What is the firm's gain or loss at sales of 8,000 watches? Of 18,000 watches?
b. What is the breakeven point?
c. What happens to the breakeven point if the selling price raises to $31? What is the significance of the change to the financial manager?
d. What happens to the breakeven point if the selling price rises to $31 but variable costs rise to $23 a unit?